The Pension Rights Center agrees that many multiemployer pension plans are in financial distress right now, and that reforms are needed, but it told a House committee this week that it doesn’t agree with the idea of cutting existing benefits to retirees.
It told lawmakers considered legislation to address the issue that a recent report by the National Coordinating Committee on Multiemployer Plans includes some good ideas for how to reform the future of multiemployer plans. Those ideas include the concept of alliances, clarifying Pension Benefit Guaranty Corp. authority to facilitate mergers, and innovative pension plan designs.
But, the Pension Rights Center said, it is “deeply troubled by the document’s suggestions for deeply troubled plans, which endorse the unprecedented and dangerous step of empowering plan trustees in ongoing and still solvent plans to slash benefits of men and women who are already in retirement and who have no opportunity to replace lost benefits.”
Testifying before the House Education and the Workforce Subcommittee on Health, Employment, Labor and Pensions, the center said it believes Congress needs to educate itself about the funding issues affecting multiemployer plans, particularly the proposals that affect people who already are retired.
It disagrees with the assumption by the NCCMP that cutting some retiree benefits now will prevent the necessity of larger reductions later should the plan fail, particularly when it applies the assumption to all retirees.
Under current law, the plan would pay every dollar of promised benefits to those retirees who die before plan insolvency, which might not occur for 15 to 20 years, the Pension Rights Center said. Retirees who are 80 or 85 years old will simply not be able to pay for utilities, medical expenses and other daily necessities if their benefits are cut.
“For such retirees, the NCCMP proposal is all pain and no gain. And in all or almost all cases, no retiree will fare better under the NCCMP proposal than they would under current law,” the center said.
It pointed out that multiemployer plan guarantees are already much lower than guarantees for single-employer plans, which generally will not reduce normal retirement benefits if they are below the maximum guarantee level, currently $57,477 for a single-life benefit.
The maximum guarantee for a retiree with 30 years of service in a multiemployer plan is only $12,870 and the guarantee for those with fewer years of services is well below that.
The NCCMP proposal would give trustees the ability to cut a retiree’s benefit to 110 percent of the PBGC guarantee. According to a Wall Street Journal article, a retired truck driver now receiving a pension of $36,268 a year would see his benefit reduced to $13,200, a loss of $23,012 a year.
The proposal doesn’t take into consideration the impact on vulnerable populations and, in some respects, leaves benefits intact for current workers who have the ability to make up some of their losses, unlike retirees who are no longer earning annual incomes, the center said.
Retiree benefit cuts are also opposed by the AARP, the International Brotherhood of Teamsters and $8.4 billion IAM National Pension Fund, based in Washington.